Lawyer: Antitrust move against Apple would ‘sink’

Antitrust charges against Apple over its decision to ban rivals’ development tools from the iPhone would likely fail because the company doesn’t have a stranglehold on the mobile market, an expert says.

“It’s going to be difficult for the government to prove antitrust allegations,” says Hillard Sterling, an antitrust attorney at Chicago-based law firm Freeborn & Peters LLP.

“The government has to show that Apple’s conduct is adversely affecting competition for consumers, and that requires that it show the absence of choice.”

However, although the iPhone is an important part of the smartphone market, it doesn’t control an overwhelming share of that market, Sterling argued.

Recent data, albeit on the global scene, back him up. Estimates by Strategy Analytics published last week show Apple’s iPhone accounts for 16.4 percent of the smartphone market, behind both Nokia, with 38.2 percent, and BlackBerry-maker Research in Motion, with 19.7 percent.

Earlier on Monday, the New York Post, citing an unnamed source, said regulators at the Department of Justice (DOJ) and the Federal Trade Commission (FTC) were arguing over which agency will open an antitrust inquiry into Apple’s actions.

The Post claimed that officials at both Justice and the FTC were looking into a recent Apple decision to block software developers from using cross-platform compilers when they create programs for the iPhone, iPod Touch and iPad.

Representatives at the DOJ and the FTC have declined to comment on the report.

Later in the day, other reports, including one by the Reuters news service, also cited sources familiar with the agencies’ plans who said that the both the FTC and Justice were mulling an antitrust investigation.

Four weeks ago, Apple modified the licensing agreement of its iPhone 4 SDK (software developers kit) to bar developers from using cross-platform compilers, tools that let programmers write in one framework — say, Flash or JavaScript — and then recompile their work in native code for another platform, like the iPhone.

Most analysts have agreed that the move was aimed at Adobe and the cross-platform compiler included in its Flash Professional CS5. Two weeks ago, Adobe acknowledged it was the target when it cancelled future development of the compiler.

Then last week, Apple CEO Steve Jobs followed up by trashing Flash as “no longer necessary” on mobile devices, and wrote at length about why Adobe’s development tool was being banned.

“The government isn’t barred from bringing an antitrust action,” says Sterling. “It could patch together something to make it float for a while. But in the end, I think it would sink. The government isn’t going to win by just showing that some competitors have been harmed.”

Adobe, which also declined comment today on the Post’s report, has not publicly claimed hardship. However, after Jobs posted his open letter slamming Flash, Adobe’s chief technology officer countered with a blog post titled “Moving Forward” that said the company was giving up on bringing Flash to the iPhone and iPad media tablet.

“We are working to bring Flash Player and AIR [Adobe Integrated Runtime] to all the other major participants in the mobile ecosystem, including Google, RIM, Palm, Microsoft, Nokia and others,” Adobe’s Kevin Lynch wrote.

Even though he believes any antitrust move against Apple would ultimately fail, Sterling doesn’t doubt that regulators are looking closely at the company. “The government probably is looking at this seriously,” said Sterling when asked how much credence to put to the initial report by the Post.

“There is a new era in antitrust enforcement with the current administration,” Sterling says.

One possibility is that the Department of Justice and the FTC are digging into Apple’s behaviour not to build a strict antitrust case, but to craft something wider, and perhaps easier to establish.

“They may be after a broader case, one focused on allegedly anti-competitive behaviour,” Sterling says. “The government may then not have to show consumer impact, but only whether a competitor is acting unfairly.”

If that’s the intent, the government’s task would still be difficult, Sterling argues, saying that the bar for unfair competition is “hard and high to clear. Hardball aggressive competition [on the part of Apple] isn’t sufficient to prove anti-competitive practices.”

In the end, much may hinge on Apple CEO Steve Jobs’ missive of last week, in which he took Flash to task and blamed third-party cross-platform compilers for resulting in “sub-standard apps” for the iPhone and iPad.

“It will go to Apple’s credibility in the end,” says Sterling. “Is it true that Apple faces technical problems if it allows cross-platform compilers? I’m sure the government has various experts looking closing at Jobs’ technical assertions.”

And if they dispute the CEO’s contentions? “The government would have a much stronger case if Jobs’ comments are only a pretext,” Sterling says.

Apple has not replied to a request seeking comment on the reports of an impending investigation.